What a performance & payment bond is
Performance and payment bonds usually come as a pair once you win a job. Public owners require them on most public works over a set contract value, and many private owners and lenders ask for them too.
Performance bond
Guarantees you'll finish the work the way the contract says. If you default, the surety arranges for the work to be finished or pays the owner, up to the bond amount.
Payment bond
Guarantees your subcontractors, workers and suppliers get paid. On public jobs they can't put a lien on public property, so the payment bond is how they get paid if you don't pay them.
In North Carolina
Under G.S. 44A-26, when construction contracts for one public project total more than $300,000, each contractor with a contract over $50,000 must give a performance bond and a payment bond, each for 100% of the contract.
- Bonds must be written by a surety company authorized to do business in North Carolina.
You need this bond if you're
- A general contractor awarded a public works contract
- A subcontractor whose subcontract requires bonding
- A contractor on a private job where the owner or lender requires bonds
- A design-builder or developer delivering public improvements
What the surety looks at
Your business, credit, experience and the contract itself. Larger contracts usually need financial statements, a work-in-progress schedule and bank references.